Global scrap trading outlooks shift due to COVID-19
Global scrap trading outlooks shift due to COVID-19
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Global scrap trade has been impacted in different ways around the world as a result of COVID-19. With the onset of COVID-19, trade in scrap commodities declined but it has since started to rise. July 16, the Washington-based Institute of Scrap Recycling Industries (ISRI) gathered several recycling industry association leaders and a price reporting agency executive to present in a webinar titled, “ISRI Global Market Recovery Series: Europe and the Americas” to discuss projections for scrap trade in the Americas and Europe. Davis Index, a global commodity price reporting agency, sponsored the webinar.
Tom Bird, president of the Bureau of International Recycling (BIR), Brussels, kicked off the webinar by sharing an overview of how COVID-19 has been impacting scrap businesses globally this summer. He noted that the BIR has a COVID-19 team that has been monitoring ways COVID-19 is impacting scrap businesses in various countries, providing regular updates on any changes to its members. Based on some of those findings, Bird discussed how scrap businesses in Europe and the Americas are faring since the onset of COVID-19.
In Italy, which was hard hit by COVID-19 early this year, scrap yards have continued to operate. However, Bird said, the steel industry in Italy is having a longer summer recess than usual.
In Spain, Bird said several automotive companies have announced plans to close manufacturing plants, spelling “bad news” for recycling in that nation. Bird did not specify on the webinar the plants closing, though.
In the U.K., he reported that automotive manufacturing has been picking up, ensuring more steady demand for recycled materials. However, he said he has heard that one of the largest recyclers in the U.K. plans to lay off one-fifth of its workforce, reflecting difficulty in the scrap recycling industry in that nation. For metals recycling, volumes are around 40 to 60 percent of normal levels, he said.
In some parts of South America, Bird said the COVID-19 pandemic is currently at its peak, which is affecting scrap recycling operations. In Brazil, he said scrap demand is healthy for the moment with prices on the rise. However, he noted prices in Brazil could drop if any restrictions tied to COVID-19 are imposed.
Ferrous outlook
Before the COVID-19 pandemic hit, U.S. steel output was at 1.9 million metric tons at a utilization rate of about 82 percent in March. However, Sean Davidson, CEO of the Davis Index, reported during the webinar that the steel output in the U.S. fell to 1.1 million metric tons by the end of April at a utilization rate of 51 percent. Since then, he said steel utilization rates have ranged from 53 to 55 percent. He said the steel utilization rate in the U.S. increased the week ending July 11 to 57.5 percent, though.
Davidson added that hot-rolled coil (HRC) prices have been down at about $460 to $470 per ton this month, which is about $50 to $60 less than where prices were at in June. Steel inventories also dropped by 4 percent in June and imports are 25 percent below prior-year levels, Davidson reported.
U.S. scrap prices have also declined. In July, Davidson said ferrous scrap prices fell $20 to $30 on prime grades and zero to $20 on shredded and cut grades compared with June. In the Midwest, he said ferrous scrap prices fell $10 to $20 on shredded and cut grades, and they fell about $40 on prime grades.
In July, he noted that prime grades tended to face steeper declines than shredded grades because of higher industrial production from the automotive sector. Also, he said mills have the ability to use internally generated scrap to dip into their inventories.
With many steel mills running at a 55 percent utilization rate, Davidson said many mills aren’t demanding more prime scrap. Although obsolete scrap grades have taken a hit this year, he said he expects obsolete scrap prices to go sideways in August.
Looking ahead this year, Davidson said he expects steel demand to be down 20 to 30 percent overall in 2020. Forecasts will improve slightly in 2021, but he said he does not expect demand to return to pre-COVID-19 levels until the first quarter of 2022 at the earliest.
“That’s the general consensus most economists are forecasting,” he said. “That’s true not just in the U.S., but for most economies. [Things] will essentially return to pre-COVID levels by the first quarter of 2022.”
Paper outlook
Simon Ellin, CEO at the U.K.-based The Recycling Association, noted during the ISRI webinar that the recycling industry is in a period of known unknowns and unknown unknowns. Ellin primarily discussed recovered paper markets in the U.K. so far this year.
At the onset of COVID-19, Ellin said the U.K. experienced “almost Christmas levels of supermarket buying and panic buying,” which he said had a marked effect on demand of material in households. He added that commercial and industrial demand for scrap seemed to fall off almost “overnight.”
Data from The Recycling Association indicates that cardboard consumption has been down in the U.K. during the COVID-19 pandemic. Ellin said there has been a 30 percent reduction in cardboard consumption since March of this year.
Additionally, he said the U.K.’s export of old corrugated containers (OCC) to India dropped significantly this spring from 57,101 metric tons in March to only 16,568 metric tons in April. However, Ellin noted that exports of OCC to Turkey remained relatively stable this spring at about 48,000 metric tons.
Ellin concluded that the global marketplace for recovered paper is continuing to evolve this year. He said China is planning to shut its doors to scrap imports by the end of this year. In addition, he said demand for recovered paper scrap is down in India, and European mills seem to be oversupplied right now.
“It’s going to be a very, very changed marketplace to what we went into initially this year,” Ellin said. “We have a great propensity across our industry to change. We’ve come across many periods of change over the years. I’m confident we’ll come out better over time.”
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Source: Recycling Today
Global scrap trading outlooks shift due to COVID-19
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